Bloomberg News

Voluntary Greek Debt Cut Is ‘Central Scenario,’ BNP Chief Says

January 16, 2012

Jan. 16 (Bloomberg) -- A voluntary Greek debt cut remains the “central scenario” as the country’s government and its creditors resume talks this week, BNP Paribas SA Chief Executive Officer Jean-Laurent Bonnafe said.

“Obviously some additional time is needed to come to a conclusion,” Bonnafe, head of France’s largest bank, said today in an interview on Bloomberg Television’s “The Pulse” with Maryam Nemazee. “For the time being, we are on a voluntary basis resolution plan so this is the central scenario.”

Greek officials and creditors agreed in October to a 50 percent cut in the face value of Greek debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing the nation’s borrowings to 120 percent of gross domestic product by 2020. The two sides, which interrupted talks on Jan. 13, have struggled to find an agreement on the coupon and maturity of the new bonds, raising the risk of a sovereign default.

Greek Finance Minister Evangelos Venizelos said two days ago that talks with the Institute of International Finance will resume on Jan. 18. The Washington-based IIF represents financial firms holding the bonds, including BNP Paribas and Germany’s Deutsche Bank AG.

BNP Paribas, based in Paris, set aside total provisions of 2.68 billion euros in the second and third quarters of last year as it wrote down its Greek sovereign-debt holdings by 60 percent following the October agreement by European leaders. BNP Paribas had 1.6 billion euros of net residual exposure to Greek bonds at the end of October, according to its website. The bank will publish 2011 results on Feb. 15.

Rating Cut

Separately, Bonnafe said he sees “no impact” for BNP Paribas’s rating from Standard & Poor’s decision last week to strip France of its AAA credit rating for the first time, by cutting the sovereign’s grade by one level to AA+.

“French banks are extremely solid both in terms of capital and liquidity,” Bonnafe said. “Their financing capacity will not be affected by this decision.”

Bonnafe also repeated that BNP Paribas will comply with Basel III capital rules as of Jan. 1, 2013. “We will be at the right level,” he said.

BNP Paribas is “well ahead” in its self-imposed plan to cut its dollar liquidity needs by $60 billion between last June and the end of this year.

“We don’t need to increase this target,” said Bonnafe. “We will do it and most probably we will close the plan quite in advance.”

BNP Paribas cut its liquidity needs by $20 billion in the third quarter, mostly in capital-markets activities, it said in November. The bank planned a further $20 billion reduction in the fourth quarter from corporate-financing and capital-markets and is targeting another $20 billion cut in 2012.

--With assistance from Caroline Connan in London. Editor: Dylan Griffiths, Keith Campbell.

To contact the reporters on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net; Mark Deen in Paris at markdeen@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net


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